Hollywood stars looked forward to living in harbourside apartments in Sydney,
or luxurious homes in Queensland, for six months while they made films at the
Fox Studios lot in Sydney or the Warner Roadshow Movie World Studios on the Gold
Coast.

Today, the Australian dollar has soared above 70 US cents, a level that
significantly erodes the budget savings Hollywood enjoyed in Australia in 1991.

That 70-plus US cent level is too high for some in Hollywood.

Hollywood producer, Lucy Fisher, who chose the Gold Coast as the shoot
location for the $US100 million Peter Pan fantasy film, admitted to AAP
she would not have made the film in Australia at the Aussie dollar's current
level.

Also hurting the Australian film industry are global security concerns. The
September 11 terrorist attacks, the Bali bombing and wars in Afghanistan and
Iraq made Hollywood's top actors and directors more reluctant to spend several
months shooting a film in Australia.

Working in a country a 14 hour flight from their homes and families in the US
became too much of a sacrifice, particularly for Hollywood's A-list who hold the
power to pick and choose where a movie is made.

Another dark cloud for the Australian film industry is the impending
Australia-US free trade agreement. There are fears an FTA could erase the 12.5
per cent tax offset the Australian government successfully introduced to woo
Hollywood.

Then there is the burly figure of Arnold Schwarzenegger.

The Terminator star, now Governor of California, has vowed to halt
"runaway" production and bring film and TV projects back to Hollywood.

"In the six years I have been doing this job I haven't seen it this tough,"
Pratt told AAP.

Of those 31 projects on Pratt's confidential list, only "a handful" of
studios were seriously looking at Australia as the shoot destination.

The projects have budgets ranging from $US10 million to over $US100 million
and would generate thousands of jobs for Australians in the film industry.

"Seriously looking at Australia?," Pratt asks.

"There's a handful, around four or five, and I'd be really happy if we landed
two or three of those."

A more dour statistic is the number of major film and television projects
lost.

Pratt estimates the current economic and world security conditions
contributed to Australia losing 10 Hollywood productions in the past year.

"There's been many," Pratt said.

"I can't tell you what they are because it's highly confidential. I can
probably tell you this year alone we would have lost 10."

They included several TV series, some TV movies and some feature films with
budgets between $US50 million and $US100 million.

Pratt's experience at the coalface in Hollywood is reflected in figures
released by the Australian Film Commission (AFC) for the 2002/03 financial
year. For the first time in eight years feature film and TV drama production in
Australia dropped.

Total expenditure in Australia in 2002/03 fell by 23 per cent to $US513
million, compared to $US663 million in 2001/02.

The number of feature films made in Australia slipped from 39 to 26
while foreign features decreased from seven to five.

The lack of Hollywood and other foreign-financed film production in Australia
resulted in a 63 per cent fall in feature production in Australia from $US131
million in 2001/02 to $US49 million 2002/2003.

The rise in the Australian dollar is partly to blame.

"If we went to 80 US cents I think I would be looking for a new job," AusFILM
chief executive Trisha Rothkrans joked.

"But at the moment we still have inquiries from overseas coming in."

Rothkrans says Australia is still competitive and points to two Hollywood
feature films, Stealth (starring Jessica Biel and Josh Lucas) and
Son of Mask (US comedian Jamie Kennedy), scheduled to shoot at Sydney's
Fox Studios.

While Australia does not have as much bang for its buck as what it did two
years ago, Australia still has some attractive traits to woo Hollywood studios,
according to Rothkrans.

"We work in different ways. We work with less crew and in a much more
competitive way and I think everyone is happy with the finished product," she
said.

"When you look at the Matrix trilogy, it is such a good calling card for all
of our technicians."

The state-of-the-art film studios in Sydney and on the Gold Coast and the new
facility being built in Melbourne provides facilities equal to any in the world.

The problem during 2003 was the Fox and Gold Coast studios were empty for
several months.

The Gold Coast studio lot was the home to the $US100 million production
Peter Pan for almost 12 months, until shooting wrapped in June. Since
June the lot has virtually been empty.

The fantasy film based on J.M. Barrie's classic tale was funded by three
major US studios Columbia Pictures, Revolution Studios and Universal Pictures
and with a $US100 million budget, it ranked as one of the most expensive films
made in Australia.

The film was shot entirely inside sound stages on the lot.

So why shoot Peter Pan in Australia if it was a film made entirely
within sound stages? Under that environment it could be made anywhere in the
world with suitable facilities.

"Money," Hollywood-based Peter Pan producer Lucy Fisher said.

"We saved a lot of money by shooting
in Australia."

Fisher was just as succinct
when asked if she would shoot Peter Pan in Australia today with the
Australian dollar above 70 US cents.

"No," Fisher said.

When Fisher and producing partner Douglas Wick selected the Gold Coast as the
shoot location the Australian dollar was worth about 50 US cents. The duo
managed to lock in some of that cheap currency to protect the production from
any rise in the Australian dollar.

"We started at about 50 cents, so we were getting 50 per cent more," she
said.

Fisher, a former vice chairperson of Sony's Columbia Tri-Star Motion Picture
Group, estimated between $US8 million and $US10 million was saved by making the
film in Queensland instead of the US.

That $US8-10 million saving was poured back into the production with better
special effects and sets. So, Peter Pan was actually a $US110 million
production.

"If we had shot it in the US you wouldn't have seen as much on the screen,"
said Fisher, whose other film producing credits include Men in Black, Jerry
Maguire and Stuart Little.

"We would have had the same amount of money but we wouldn't have had as much.
We built everything. It was like an old-fashioned 1930s movie where we
took over the whole studio and built everything."

At least two films the sci-fi film I, Robot starring Will Smith and
the thriller Gothika starring Halle Berry and Penelope Cruz were
pencilled in for Australia but were lost to Canada because of a number of
factors, including the reluctance of cast and senior crew members to spend
extended periods in Australia.

"The war in Iraq made actors and directors more nervous to travel because
they want to be home with their families," AusFILM's Pratt explained.

"Canada is only a couple of hours flight from LA, particularly Vancouver.
That's an important factor, particularly large budget feature films with A-List
actors and directors who have so much power in where things are shot."

Ask Hollywood-based director Richard Donner about shooting a film in
Australia and he jokes: "It's tough on weekends if you want to go home and see
the family."

Donner and wife Lauren Shuler Donner are one of the most powerful couples in
Hollywood. He is a director and producer. She is a producer.

They know how to make a film on a tight budget.

They also know how to make them on a $US100 million-plus budget.

Donner directed Mel Gibson's four Lethal Weapon movies, he shot
Christopher Reeve in Superman: The Movie and a string of big-budget
Hollywood productions, including Julia Roberts in Conspiracy Theory and
Sylvester Stallone in Assassins.

Shuler Donner has the two X-Men films on her resume and is working
on the third as well as a spin-off movie for Hugh Jackman's X-Men
character, Wolverine.

The couple combined their expertise to make their latest project, the time
travel adventure film, Timeline, starring Australian actress Frances
O'Connor.

Donner is proudly American and during his interview with AAP wears a badge
promoting Retired Army General and US presidential candidate Wesley Clark. But
as patriotic as Donner is, he understands every movie he makes cannot be made in
the US.

Timeline, like most Hollywood productions shot outside the US, was made in
Canada.

"The bottom line, it comes down to cost," Donner said.

The incentives the
Canadian government provided Hollywood filmmakers, Shuler Donner said, also made
the decision to shoot north of the American border financially attractive.
"They give you all kinds of
things, incentives, they do actor buyouts on residuals," she said.

Asked if the rise in the Australian currency to over 70 US cents would push
him away from shooting a film in Australia, Donner said "99 per cent" of the
decision on where to make a film "is motivated on a monetary issue".

"If you are impacted adversely you think twice about going," Donner said.

"We try not to. We just want to make the film where it is best suitable."

Australia's rival in rugby, league and cricket, New Zealand has emerged as a
force in movie-making.

Ask executives in Hollywood
about making movies outside the US and New Zealand, along with Canada, Australia
and eastern Europe will more than likely be mentioned. That wasn't the case three years ago.

The Lord of the Rings trilogy and the success of TV series Xena:
Warrior Princess and Hercules: The Legendary Journeys put New
Zealand on Hollywood's radar screen.

Tom Cruise's The Last Samurai was largely shot on farmland in New
Zealand's north island. Gwyneth Paltrow shot some of her new film,
Sylvia, in New Zealand and Rings director Peter Jackson is
preparing to shoot King Kong in his homeland.

A new Power Rangers TV series is being made in NZ, two Hollywood TV movies
are scheduled to begin shooting after Christmas and a Seth Green comedy,
Without a Paddle, and a Miranda Otto film, In My Father's Den,
are being made there.

"There are number of big productions looking at setting up operation in
January and February. I'd love to tell you but I'd be taken out and shot,"
assistant manager of screen production for Investment NZ, Paul Voight, said.

Voight says even if the $US300 million spent in creating the Rings trilogy
was excluded, New Zealand has enjoyed "steady growth in overseas production" in
recent years.

"Spending $US300 million creates a distortion in any long-term statistics.
But it's still trending upwards without Rings."

But New Zealand doesn't view itself as a competitor to Australia. Voight says
New Zealand works alongside Australia to attract Hollywood projects for both
countries.

"We actually tell people straight up front if a particular film will be
perfectly suitable for, say, Queensland," Voight said.

"We don't have the beaches where you can jump into the water 12 months of the
year without a wetsuit.

"You couldn't have really made Lord of the Rings in Australia, or
Vertical Limit, and I don't think you really could have made The
Last Samurai in Australia.

"Similarly, you couldn't have shot The Thin Red Line in New Zealand
because we just don't have that type of jungle or the Matrix which
needs a big city."

The New Zealand government has formulated what it calls a 12.5 per cent
expenditure grant to overseas filmmakers, an incentive similar to the Howard
government's 12.5 per cent tax offset.

But as rosy as what the New Zealand film industry appears to be, Voight said
the industry has also suffered from the strengthening of the the Kiwi dollar
against the greenback.

"Australia, New Zealand and Canada have been knocked around," Voight said.

"It's the free-falling US currency that's hurting us all.

"A lot of films were budgeting in New Zealand at 51 or 52 US cents and
suddenly that 10 cent hike has really knocked things around."

Voight said a film with a budget of about $US50 million was
scheduled to be shot in New Zealand but the producers pulled the plug on it
partly because of the currency rise. AusFILM's Pratt says he has seen a
change in attitude in Hollywood in recent years.

With governments in Canada, NZ, eastern Europe and Australia offering tax
incentives and subsidies to shoot in their respective countries, Hollywood, more
than ever, is looking at the bottom-line.

"Here's a really good example. Last Thursday night I ran into a senior
executive for one of the major studios in town and we had a chat," Pratt said.

"She's in the tax side of the business and she basically said to me it's
really where they can get the best deal and that comes down to incentives. It's
a combination of incentives and of course the dollar exchange rate. It still has
to work creatively for the director of course, but it comes down to that now.

"Ten years ago it wasn't that important.

"The incentive side of it has become such a driving force now it's become
extremely competitive."